A NATURAL EXPERIMENT ON THE ENVIRONMENTAL PROTECTION AGENCY’S LEGAL ENFORCEMENT AND ITS EFFECTS ON VOLKSWAGEN’S FOREIGN DIRECT INVESTMENT IN THE UNITED STATES

Open Access
Author:
Burrows, Charles Lane
Area of Honors:
Legal Environment of Business
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Daniel Robert Cahoy, Thesis Supervisor
  • Fiona Marie Greaves, Honors Advisor
Keywords:
  • volkswagen
  • environment
  • business law
  • epa
  • environmental protection agency
  • foreign direct investment
  • fdi
  • united states
  • volkswagen scandal
Abstract:
This thesis examines the relationship between criminal prosecution of corporations that violate Environmental Protection Agency (EPA) regulations and the potential effects on foreign direct investment. In order to examine this relationship, I considered a natural experiment involving Volkswagen’s U.S. investments arising when the firm committed criminal fraud on two separate occasions by failing to disclose the use of technology known as a defeat device. In the first 1970s-era case of fraud, the EPA charged Volkswagen under a civil offense and settled out of court. In the second (more infamous) case from 2015, Volkswagen was prosecuted in criminal court for the same charges against both high-level executives as well as the corporation itself. My analysis suggests that, the EPA’s choice to prosecute in civil court or criminal court has little impact on Volkswagen’s investment strategies, and that ultimately larger macroeconomic factors such as the size of the automobile market in the United States are greater forces on investment strategy. This research implies that since the main goal of the EPA is to protect the environment, the agency should not be afraid to push heavy legal action against companies violating environmental laws, since it will not deter investment into the United States.